CGTMSE Scheme: Boosting Credit Access for MSMEs with ₹2 Lakh Cr Guarantee

Why the scheme is in the news?

The Union Minister for MSME, Shri Narayan Rane, launched the restructured CGTMSE Scheme in Mumbai on a recent date. The CGTMSE Scheme has received an extra corpus support of ₹9,000 crores in the FY 2023-24 Union Budget to revamp the scheme, which will provide a guarantee for an additional ₹2 lakh crore to Micro & Small Enterprises.

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Ministry: – Ministry of Micro, Small & Medium Enterprises (MSME)

Launch Year: – 2000

Implementing Body: – Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

Objectives: – The primary objective behind launching the Credit Guarantee Scheme (CGS) was to enhance the credit delivery system and facilitate the flow of credit to the Micro and Small Enterprises (MSE) sector. The scheme aimed to create access to finance for those who were unserved, under-served, and underprivileged, and make finance available from traditional lenders to the new generation of entrepreneurs.

Beneficiaries: – Micro, Small & Medium Enterprises (MSME) Industry

Eligibility criteria: –

1. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) provides guarantee cover to credit facilities sanctioned up to Rs. 200 lakhs without requiring any collateral security or third-party guarantees to all new and existing micro and small enterprises, both in manufacturing and services sectors, except for educational and training institutions.
2. CGTMSE has recently introduced a modified scheme that includes a Hybrid Security product. This allows for loans sanctioned to MSE units with partial collateral coverage to be covered under the credit guarantee scheme (CGS) of CGTMSE. Under this scheme, a portion of the loan that is not covered by collateral security, with a maximum of Rs 2.00 Crs, can be covered under CGTMSE.
3. CGTMSE provides coverage for retail trade activities, with a maximum exposure limit of Rs 1.00 Cr.

Exclusion criteria: – Loans sanctioned under the agriculture segment and Self Help Groups (SHGs) are not eligible for coverage under CGTMSE.

Funding: – Charges Annual guarantee fee for loans.

Budget Allocation: – Rs 9,000 crore

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